Question description
Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its production facility. These costs (in Argentinian pesos) at high and low levels of activity over recent years are given below:Level of ActivityLowHigh Machine-hours 58,800 78,400 Total factory overhead costs 263,660 pesos 296,980 pesosThe factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 58,800 machine-hours level of activity as follows: Indirect materials (variable) 82,320 pesos Rent (fixed) 131,000 Maintenance (mixed) 50,340 Total factory overhead costs 263,660 pesosFor planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.Required:1.Estimate how much of the factory overhead cost of 296,980 pesos at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the 296,980 pesos cost consists of indirect materials and rent. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.) Maintenance cost at high level of activity pesos 2.Using the high-low method, estimate a cost formula for maintenance. (X represent per machine-hour.) (Round the “Variable cost per machine-hour” to 2 decimal places and “Fixed cost” to the nearest whole number.) Y = pesos + peso X3.What total overhead costs would you expect the company to incur at an operating level of 64,680 machine-hours? (Do not round intermediate calculations. ) Total factory overhead cost pesos
